The country is bracing for the lowest economic growth in 14 years, thanks to over a four-month border blockade, months-long Tarai unrest and delayed reconstruction which hit the economy hard.
The Central Bureau of Statistics (CBS) in its National Account Estimate Report, which was made public on Tuesday, has projected the Gross Domestic Product (GDP) growth of 0.77 percent for fiscal year 2015-16. Last time when economic growth was below one percent was in fiscal year 2001-02 when the GDP saw a meagre growth of 0.16 percent.
The GDP narrowly escaped the negative growth.
The NRB report titled ‘Impact of Unofficial Indian Embargo on Nepali Economy’ had stated that Nepal could see a negative economic growth for the first time in 33 years. The CBS projection is very close to that made by the International Monetary Fund (IMF), which in its World Economic Outlook had predicted the GDP growth at 0.5 percent.
Nominal per capita GDP too is projected to decrease to $752 from previous year’s $762. However, in terms of rupees, per capita income is projected to grow by Rs 3,842 this fiscal against Rs 4,666. Per capita income this fiscal is Rs 80,921 compared to Rs 77,079 last fiscal.
According to the CBS report, almost all the sectors of economy suffered this fiscal. The agriculture sector is estimated to grow at the rate of 1.14 percent whereas the non-agriculture sector will grow by 0.62 percent. In the last fiscal, the agriculture sector and non-agriculture sector had expanded by 4.72 percent and 5.34 percent respectively.
The primary sector, which contributes 32.28 percent to the total GDP and includes agriculture and forestry, fishery and mining and quarrying, is predicted to grow by just 1.22 percent. Last year’s earthquakes, prolonged drought and the blockade contributed to the low growth in this sector.
The CBS has predicted the secondary sector contributing 13.43 percent to the total GDP to contract by 6.3 percent. It includes manufacturing industries, electricity and construction. The four-and-a-half-month-long Indian b blockade coupled with the Tarai unrest hit the industrial sector most.
The CBS forecasts a negative growth in the industrial sector (-9.86 percent).
The blockade’s impact is visible from the negative growth rates of mining and quarrying; manufacturing; electricity, gas and water; construction; wholesale and retail trade and hotels and restaurants sub-sectors.
Economists said that the bleak economic indicators were the result of the Indian blockade and Tarai unrest.
“This may come as a major setback for Nepal as the country is trying to graduate from a least developed country to a developing country by 2022 and become a middle income country by 2030,” said Shankar Sharma, former vice-chairman of the National Planning Commission. “Our development has been pushed back by around two to three years.”
According to CBS, the tertiary sector which contributes 54.29 percent to the total GDP and includes service sectors like wholesale and retail trade, hotels and restaurants, storage and communications and financial intermediaries among others is expected to expand by 2.67 percent.
The final consumption expenditures as percentage of the GDP are predicted to increase to 94.74 percent from previous year’s 91.21 percent.
“The surge in remittance coupled with high rate of inflation has fuelled the high consumption,” said Govinda Raj Pokhrel, also former vice-chairman of NPC.
The low saving of 5.26 percent as projected by CBS is likely to hinder the economic growth in coming days.
“The GDP growth will be hit hard further due to low saving and lack of productive investment,” said Pokhrel.
Source: The Kathmandu Post